How You Can Live Without A Credit Card

[Colleen27]

And this is something I think more cash only people should give some forethought to. If you have a years worth of cash in the bank for emergencies, that's fantastic...but it doesn't do you any good if the emergency cost more than your available funds and it happens when the bank is closed for a few days and you can't access it! Not everyone takes checks or IOU's.

A great example is being stranded while traveling. Let's say you fly down to WDW for a week. I'ts a Sunday and your vacation is over and you head to the airport to fly home, only to discover the Blizard of the Century is raging to the north and not only has your flight been canceled, but all the flights for the rest of the day. Now, you could stay an extra night (at your own expense as airlines don't pay for your hotel when the cancelation is due to weather) but your wife needs to be back at work tomorrow or lose her job and anyway the kids really need to be back in school. You find out that another airline has four seats left on their last flight of the day, which hasn't been canceled. But again, because the cancelation is due to weather, the airline you are on won't pay for the new tickets, you have to pay out of pocket. The tickets are $300 each, or $1200 to get the four of you home. After spending most of the money you have available on your debit card for the vacation, you only have $200 in your checking account. You've got plenty of money in savings...but the ATM only lets you take out a max of $300 a day and since it's the weekend, any transfer from savings to checking so you can use your debit card won't post until Monday morning. How do you pay for the tickets home?

Of course there are ways around this that don't include have a CC as a back up plan (keeping lots of money in checking, for example) but if you don't take the time to think up of various senarios that may require you need a large amount of money available at some weird hours of the day or night, you could find your self with plenty of money yet no way to actually pay for anything.

It really isn't that difficult to plan for, but really the question is like asking "What if you ran your card up to the limit and then ran into an emergency?". We'd never cut ourselves that close on the debit card as far as spending money while we travel, any more than someone using a credit card would take that as their one and only payment method then run it up within a few hundred dollars of the limit. That's just foolishness regardless of the payment method involved.

One of our checking accounts is linked to a higher-interest savings account as back-up funding just in case. Yes, that does increase the risks with that debit card, which is why we use a different account for the vast majority of our spending (that and because the other card has better rewards, while this one has stronger fraud protections), but it works for us. At Disney, for example, we'd use the reward card for check in and spending money. The emergency card would stay in the safe with my wallet. So even if there were only $200 left of the amount we budgeted to the everyday card, we'd still have access to a significant emergency fund via the other.

 

[bellarella]

For us, #2 on the pro-credit side is one of the reasons we've never been comfortable with credit cards. DH is self employed and our income can vary wildly. I'd rather not have a CC balance that needs paid (even if it is only a few days old and not yet accruing interest) in case we have to chase down funds from a bounced check or weather delays job completion and thus final payment or whatever. I'd probably be more comfortable with the approach of charging everything and paying it off as soon as the bill comes if our income came as a more or less fixed paycheck at fixed intervals.

I honestly don't understand this. (and I don't mean that in a snarky way)

If you are only spending on a credit card what you already have in your bank account, how would future cash flow issues be any more problematic than if you paid with cash?

I think that this might be some of the misunderstanding of what some of us are saying about how we use credit cards? There is no float necessary. It is strictly a matter of convenience. When I charge something on my card, there is money for that item in the bank. That money doesn't get spent on anything else between when I charge the item and when I pay it off. So if I buy something on my credit card, and my next paycheck doesn't come in, I am in no different a position than if I had paid cash. The money is still in the bank waiting to pay that bill.

Now, I will admit that this has gotten *easier* to do as my income has gone up, in the sense that I have a large enough cushion in my account that I always just "know" that I'm within my budget. But even in my really, really lean days, I still used my credit card -- I just kept up with my balance as diligently as I would have with my ATM card, to make sure I was only spending money already in the account rather than money I was anticipating would be in the account.

 

[Colleen27]

I honestly don't understand this. (and I don't mean that in a snarky way)

If you are only spending on a credit card what you already have in your bank account, how would future cash flow issues be any more problematic than if you paid with cash?

I think that this might be some of the misunderstanding of what some of us are saying about how we use credit cards? There is no float necessary. It is strictly a matter of convenience. When I charge something on my card, there is money for that item in the bank. That money doesn't get spent on anything else between when I charge the item and when I pay it off. So if I buy something on my credit card, and my next paycheck doesn't come in, I am in no different a position than if I had paid cash. The money is still in the bank waiting to pay that bill.

Its just me, and I know it isn't entirely rational. I'm not quite confident in our income/savings balance yet - we've been in business for 6 years, and the last 2 have been very tough because of the housing slump. So I don't like having any more "must pays" than are absolutely necessary. Delaying a purchase is more comfortable than dipping into the bank account for a payment that can't be put off.

 

[brergnat]

I honestly don't understand this. (and I don't mean that in a snarky way)

If you are only spending on a credit card what you already have in your bank account, how would future cash flow issues be any more problematic than if you paid with cash?

I think that this might be some of the misunderstanding of what some of us are saying about how we use credit cards? There is no float necessary. It is strictly a matter of convenience. When I charge something on my card, there is money for that item in the bank. That money doesn't get spent on anything else between when I charge the item and when I pay it off. So if I buy something on my credit card, and my next paycheck doesn't come in, I am in no different a position than if I had paid cash. The money is still in the bank waiting to pay that bill.

Now, I will admit that this has gotten *easier* to do as my income has gone up, in the sense that I have a large enough cushion in my account that I always just "know" that I'm within my budget. But even in my really, really lean days, I still used my credit card -- I just kept up with my balance as diligently as I would have with my ATM card, to make sure I was only spending money already in the account rather than money I was anticipating would be in the account.

Many, MANY people live "paycheck to paycheck". That is, they do NOT have a large balance in their checking accounts at all times. They get paid, they pay bills, buy food, gas, etc. They are left with little to nothing until the NEXT paycheck. This is how people get in trouble with cc's. They use the cc's to charge "stuff" between when they run out of money and the next paycheck. Then, they need to use the next paycheck to pay the cc bill and that leaves a deficit for the rest of the bills/spending and so the cycle continues.

 

[indimom]

Its just me, and I know it isn't entirely rational. I'm not quite confident in our income/savings balance yet - we've been in business for 6 years, and the last 2 have been very tough because of the housing slump. So I don't like having any more "must pays" than are absolutely necessary. Delaying a purchase is more comfortable than dipping into the bank account for a payment that can't be put off.

I get what you are saying here. My income can change dramatically from one week to the next or from one month to the next. Seriously, I had one week this summer where I brought in a grand total of $40. And that was part and parcel of why we ran into credit card trouble back in 2001. I didn't plan for any way to cover the lean weeks.
Now, we do use a credit card for a lot of purchases, BUT I've had over 12 years to acclimate to the variables in my job, get a good handle on how much we spend on our bills month to month, build an emergency fund, plus we always have hubbies regular weekly paycheck.
But I will always have a little fear of falling off track. It's hard not to, once you've experienced a setback like we had.

 

[lurkernj]

I haven't read the entire 7 pages, but if one can be responsible with a card, they can be extremely beneficial.

DH and I have had the same Continental Visa for 15 years. We charge EVERYTHING and pay it off when the bill comes. We pay an annual fee of $60. So over 15 years we have paid $900 total. For this $900, four of us flew to Hawaii for free five years ago, tickets that would have cost us $3200. I just booked 4 more tickets to Hawaii for next August, tickets that would have cost us $3600. With this same card, DH and I flew to New Orleans, tickets worth $550. So this one card that has cost us $900 has reaped us $7350 in free airfare and vacations we never could have afforded otherwise. This card also comes with the benefit of free luggage(don't remember if it is one or two bags as we have only used one) for up to 10 people booked on the same reservation number. We also opened a Hilton card two years ago that had some great startup points, added to the points we have accumulated, we have enough for 4 free nts in Hilton Waikaloa village for next year. $4600 of my vacation is free next year (this card was free for the first year and $65 this year, I will keep it for a bit longer then cut it loose).

Not to mention the $415 in Disney dollars I will be using for my solo trip this December, my trip will cost me about $500 including airfare.

 

[mhsjax]

For us, #2 on the pro-credit side is one of the reasons we've never been comfortable with credit cards. DH is self employed and our income can vary wildly. I'd rather not have a CC balance that needs paid (even if it is only a few days old and not yet accruing interest) in case we have to chase down funds from a bounced check or weather delays job completion and thus final payment or whatever. I'd probably be more comfortable with the approach of charging everything and paying it off as soon as the bill comes if our income came as a more or less fixed paycheck at fixed intervals.

Personally, I don't care for the way the credit card industry does business and I like the fact that they don't get ours. I don't think they're bad for everyone. That's not for me to decide. But as an industry, they make most of their money off of irresponsibility and for many years they've specifically targets demographics that are likely to be irresponsible or short-sighted in their spending habits.

No, a credit card wouldn't be an option for us if we ran through our savings. There's no reason to keep digging when you're already in a hole. We would find other ways to cope.

I agree 100% about what you said about the credit card industry, like I said earlier, I worked for one. The don't stay in business by people paying off the credit cards, they don't like these people, they aren't considered good customers. Where I worked and it was a VERY big one, if someone called in that paid off all the bills 100% and on time, they would get a much smaller credit increase than the person that revolved their charges, because they would make much more money on the person that carried a balance.

I refuse to do business with an industry like this, if other people want to that is fine, and there are all sorts of reasons to use and not use a credit card, but for me, nope no thanks.

Oh by the way, 5 years ago when we were still using our card, we had money taken our of our acct with a debit acct #. I still had the card but they got the info. ! week later they got my credit card number sand again charged $2000.00 one the card.

We were leaving on a cruise and was concerned about what to do. The bank replaced our money that was within a few days, our credit card was canceled and we couldn't get a new one for 3 weeks. In this case our debit card was taken care of more quickly.

 

[arminnie]

our credit card was canceled and we couldn't get a new one for 3 weeks.

WHO was your card issuer? That is ridiculous.

My sister and I were in London when her card got pickpocketed. She reported it about 11pm. By 10 am she had a replacement card the next day.

I was in Australia when my card got stolen. It did take a little over 24 hours as a card had to be overnighted from Singapore.

In the U.S. it should pretty much be an overnight delivery unless you are really out in the boondocks someplace. Now you may have to ask for this level of service, but it is available.

 

[Dismom55]

I am a bit late to this thread, but thought I would add my thoughts.

Hubby and I have been married 38 yrs and have never had a credit card. We made the decision not to be bogged down with cc debt after getting married. About a year ago, for our last trip I found it difficult to rent a car without a cc, so we went ahead and got one for that purpose and that purpose only. I pay it off pretty much as soon as the charge appears, so it really is not costing us. Reason was the rental car company would have been tying up our ready cash for to long, so the cc became easier for rental cars. ALL other expenses we have are paid using debit card/cash.

Basically, I am saying if it were not for Disney trips we still would not have a CC and life has been better for it. I set my own limit when I applied for the card and do not care or want increases. I do not care if they (the cc company) like me, it is what is good for my budget. Oh yes one other thing I did was open a separate saving acct, I keep the allowable cc balance in that savings acct, then if money gets really tight after a Disney trip and I find myself strapped to pay the cc, well I do have the saving acct to fall back on and pay it off. I have the added benefit that instead of paying interest to the cc I am earning interest on that saving acct. When $$$ has gotten tight (we are not rich people), I have been glad not to have the cc bills. With the grace of God we have managed to get by when those financial emergencies have occured. Our kids have seen how we manage with out cc and I hope have learned they do not need them either.

Just my thoughts here on how it can be done without cc and you still can manage and maybe in the end have the ability to do more by saving all that interest payments. Oh yes, Disney trips are purely cash, I save the money before I leave the house, get travelers checks (free at my bank). I take great comfort in knowing I will NOT be receiving a hugh bill once I get home. In my way of thinking much better memories of a great time.

I hope I did not sound preachy, did not mean to come off that way at all, just that living without cc can be done and in our case has been a good thing.

 

[bellarella]

Many, MANY people live "paycheck to paycheck". That is, they do NOT have a large balance in their checking accounts at all times. They get paid, they pay bills, buy food, gas, etc. They are left with little to nothing until the NEXT paycheck. This is how people get in trouble with cc's. They use the cc's to charge "stuff" between when they run out of money and the next paycheck. Then, they need to use the next paycheck to pay the cc bill and that leaves a deficit for the rest of the bills/spending and so the cycle continues.

I agree -- but that is a budgeting issue, not a a credit card issue. I understand that for some people, debit cards enforce more discipline about keeping up with purchases (though hearing about all the overdraft fees that people pay, that's not entirely fool-proof either).

What I was pushing back against was the notion that if you use your credit card like a debit card (don't put charges on it unless that money is in the bank, and then don't use that money for anything else), then there is no *actual* difference in your financial situation. There is no more risk if your future paycheck fluctuates than if you had paid cash.

When I was living paycheck to pay check, this is how I handled it. I deducted purchases from my checking account as if I had written checks when I used my CC -- that way when the bill came, the money was always there.

 

[LovableGluttons]

If the fees are paid by the merchant for transactions, how does the merchant get that money back? Higher prices? Prices seem high enough already.

My parents have credit cards, haven't filed Bankruptcy, live modestly.

I remember my mother taking me shopping for school clothes and using a credit card. That clearance price shirt might end up costing the regular price if a big bill came up that kept my parents from paying that balance on full.

It stuck with me. My parents bought a car for $12,000 new. They paid monthly on it for several years. When it was paid off, they had paid $18,000!

I paid $200 for my first car and drove her four years!

 

[Mellie2162]

When I was living paycheck to pay check, this is how I handled it. I deducted purchases from my checking account as if I had written checks when I used my CC -- that way when the bill came, the money was always there.

This is a good idea. I wish we had done this when we were using CC years ago.

 

[arminnie]

If the fees are paid by the merchant for transactions, how does the merchant get that money back? Higher prices? Prices seem high enough already.

Did you know that handling cash has huge costs associated with it? Security, auditing, loss, etc. Same thing with checks.

Card processing costs can actually be less for a merchant even after paying the merchant fees. Believe me if cash were cheaper for Walmart they would never accept a card again. Lots of studies have been done on this.

Doctors' offices sometime have a problem with cash "walking". Especially at a specialist like a plastic surgeon where most of the work is not covered by insurance. I've had several just regular doctors where I could not pay my co-pay with cash. They just made it a policy to have no cash in the office period.

If a merchant accepts a card in good faith (and it was authorized) the merchant is guaranteed payment even if the card has been lost or stolen. They bear none of the risk if they followed all the rules.

Here is one hard and fast rule:
When money is involved lots of checks and balances are needed. It's sort of like locking all the doors and windows when you go to bed. Most of the time you will be okay, but the chances of having something bad happen go up dramatically when you leave an opening.

 

[mhsjax]

WHO was your card issuer? That is ridiculous.

My sister and I were in London when her card got pickpocketed. She reported it about 11pm. By 10 am she had a replacement card the next day.

I was in Australia when my card got stolen. It did take a little over 24 hours as a card had to be overnighted from Singapore.

In the U.S. it should pretty much be an overnight delivery unless you are really out in the boondocks someplace. Now you may have to ask for this level of service, but it is available.

It was through a credit union, they had to give us a new number. We weren't traveling then it happened, I guess if we had really needed the card then we could have pushed it, but I don't know. We just used our debit card and took one other card that we had tucked away for absolute emergencies, ( I kept this one for big emergencies) just in case we needed it. We were on the Disney Cruise, so really didn't have to use it at all, just the debit card.

 

[mhsjax]

Did you know that handling cash has huge costs associated with it? Security, auditing, loss, etc. Same thing with checks.

Card processing costs can actually be less for a merchant even after paying the merchant fees. Believe me if cash were cheaper for Walmart they would never accept a card again. Lots of studies have been done on this.

Doctors' offices sometime have a problem with cash "walking". Especially at a specialist like a plastic surgeon where most of the work is not covered by insurance. I've had several just regular doctors where I could not pay my co-pay with cash. They just made it a policy to have no cash in the office period.

If a merchant accepts a card in good faith (and it was authorized) the merchant is guaranteed payment even if the card has been lost or stolen. They bear none of the risk if they followed all the rules.

Here is one hard and fast rule:
When money is involved lots of checks and balances are needed. It's sort of like locking all the doors and windows when you go to bed. Most of the time you will be okay, but the chances of having something bad happen go up dramatically when you leave an opening.

Wow, I would never go to a place that refuses to accept cash. I usually use my debit card, but sometimes I have the cash. DH have and I have about 5 different Dr's and not one of them refuses cash. I do have one that won't accept checks to many problems with bounced checks. But no Cash, Sorry, no cash, no business from me. Just rubs me the wrong way.

PS I handled all the cash for a very large physicians practice for years. NO problems what so ever.

PSS, I do under stand about plastic surgeons, but not for co pays. that is crazy.

 

[MrsPete]

I remember my mother taking me shopping for school clothes and using a credit card. That clearance price shirt might end up costing the regular price if a big bill came up that kept my parents from paying that balance on full.

The no-credit-card crowd keeps saying this same type of thing: What if you charge something and can't pay the bill?

Y'all simply aren't hearing the answer: Those of us who are using credit cards responsibly and without cost to ourselves DO NOT charge something if we don't have the money to pay for it. I know what bills I have coming up, and I wouldn't buy the shirt (even on clearance-price) if it'd mean there's a possibility that I couldn't pay the credit card bill. I have my emergency fund in place so that IF my car breaks down or the refrigerator dies, I don't have to choose between paying for that necessity or paying the credit card bill.

Even when I was younger and poorer, we lived the same way. We NEVER charged with the assumption that our next paycheck'd cover that bill.

 

[Marionnette]

The no-credit-card crowd keeps saying this same type of thing: What if you charge something and can't pay the bill?

Y'all simply aren't hearing the answer: Those of us who are using credit cards responsibly and without cost to ourselves DO NOT charge something if we don't have the money to pay for it. I know what bills I have coming up, and I wouldn't buy the shirt (even on clearance-price) if it'd mean there's a possibility that I couldn't pay the credit card bill. I have my emergency fund in place so that IF my car breaks down or the refrigerator dies, I don't have to choose between paying for that necessity or paying the credit card bill.

Even when I was younger and poorer, we lived the same way. We NEVER charged with the assumption that our next paycheck'd cover that bill.

Amen! I dont think that the "credit cards are evil" crowd understands that there really are people who manage their spending well. I consider my cards like a financial tool. Its convenient to carry the plastic. Its less risky than carrying cash. I get extended warrantees with my credit card. I have perks like early access to tickets. I get rewards points for my spending. And I dont spend money that I dont have just like the people who carry cash or use a debit card.

 

[cm8]

The no-credit-card crowd keeps saying this same type of thing: What if you charge something and can't pay the bill?

Y'all simply aren't hearing the answer: Those of us who are using credit cards responsibly and without cost to ourselves DO NOT charge something if we don't have the money to pay for it. I know what bills I have coming up, and I wouldn't buy the shirt (even on clearance-price) if it'd mean there's a possibility that I couldn't pay the credit card bill. I have my emergency fund in place so that IF my car breaks down or the refrigerator dies, I don't have to choose between paying for that necessity or paying the credit card bill.

Even when I was younger and poorer, we lived the same way. We NEVER charged with the assumption that our next paycheck'd cover that bill.

You hit the nail on the head with that statement. My mama always said to not count your chickens before they hatched. I know many people who spend $$ in advance and are S out of luck when something did not fall the way it was supposed to. I never understood people who borrowed from tomorrow to spend for today, that just creates a big .

 

[MommyBryn]

We live paycheck to paycheck (not because we're frivolous spenders, just because we have a low income and we're paying off student loans ahead of time...but we're actually making more than ever and we're very well off, because we live within our means), AND we charge almost EVERYTHING to our credit cards. But we treat our credit card like cash or a debit card- it comes immediately "out" of our account in our bank register, so if we've put that charge on the card, the money is gone. In other words, if we don't have the money, we DON'T BUY IT. And then I pay it 2-3 times a month. We've never carried a balance, never paid any fees, and have only reaped the benefits of our rewards cards. For us, we spend MORE when we have cash...it's so much less personal to us, I guess. If I have $5 in my purse I'm more likely to grab a snack at the gas station or something (okay, I never do THAT, but just an example LOL). But with the CC, we check our accounts at least every other day, we see exactly where our money is being spent, the balance, etc, and we regularly and consistently update our register. So it works very well for us, but I know so many people who could never do it. So it's definitely not for everybody!

 

[nrhenley]

I believe that credit cards are wonderful. If someone takes your cash, you are without the cash. But if someone takes your credit card, you can track who took it and even get back the money spent by the person that took the card. That is really a perk!

Also, the points and incentives are phenominal! When do you get a free flight simply from opening your wallet!

Pay it off per month and live within your means! Take advantage of the perks!